Earning Management, Institutional Investors and R&D Expenditure

The impact of institutional investors on long-term investment like R&D investment has always been the focus of the theoretical circle. Based on manufacturing firms' R&D data during 2006-2009, we studied the effect of institutional investors' shareholding on company's R&D investment. Results show that shareholding of China's mutual funds and total institutional investors' shareholding are negatively correlated with the earning management behavior by cutting R&D expenditure, which verify that institutional investors can promote R&D investment and protect investor's interest, and is not myopic investors.